How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Corteva, Inc. (NYSE:CTVA).
Corteva, Inc. (NYSE:CTVA) shareholders have witnessed a decrease in enthusiasm from smart money in recent months. Corteva, Inc. (NYSE:CTVA) was in 35 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. There were 38 hedge funds in our database with CTVA holdings at the end of December. Our calculations also showed that CTVA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
John Petry of Sessa Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to review the fresh hedge fund action regarding Corteva, Inc. (NYSE:CTVA).
Do Hedge Funds Think CTVA Is A Good Stock To Buy Now?
Heading into the second quarter of 2021, a total of 35 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from the fourth quarter of 2020. On the other hand, there were a total of 36 hedge funds with a bullish position in CTVA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Starboard Value LP was the largest shareholder of Corteva, Inc. (NYSE:CTVA), with a stake worth $579.7 million reported as of the end of March. Trailing Starboard Value LP was Eminence Capital, which amassed a stake valued at $349.1 million. Sessa Capital, Glenview Capital, and AQR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Starboard Value LP allocated the biggest weight to Corteva, Inc. (NYSE:CTVA), around 12.37% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, setting aside 8.47 percent of its 13F equity portfolio to CTVA.
Because Corteva, Inc. (NYSE:CTVA) has experienced falling interest from the smart money, it’s easy to see that there exists a select few hedgies who sold off their entire stakes by the end of the first quarter. Interestingly, Brandon Haley’s Holocene Advisors cut the largest investment of all the hedgies followed by Insider Monkey, comprising close to $22.6 million in stock, and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital was right behind this move, as the fund said goodbye to about $11.9 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Corteva, Inc. (NYSE:CTVA) but similarly valued. These stocks are Pioneer Natural Resources Company (NYSE:PXD), Tencent Music Entertainment Group (NYSE:TME), Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN), Hilton Worldwide Holdings Inc (NYSE:HLT), Corning Incorporated (NYSE:GLW), Zimmer Biomet Holdings Inc (NYSE:ZBH), and Peloton Interactive, Inc. (NASDAQ:PTON). This group of stocks’ market values match CTVA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PXD | 37 | 623143 | -3 |
| TME | 63 | 1771488 | 37 |
| ALXN | 77 | 6915184 | 0 |
| HLT | 47 | 5139343 | -13 |
| GLW | 32 | 507110 | -7 |
| ZBH | 50 | 2151143 | -3 |
| PTON | 64 | 3963327 | 1 |
| Average | 52.9 | 3010105 | 1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 52.9 hedge funds with bullish positions and the average amount invested in these stocks was $3010 million. That figure was $1503 million in CTVA’s case. Alexion Pharmaceuticals, Inc. (NASDAQ:ALXN) is the most popular stock in this table. On the other hand Corning Incorporated (NYSE:GLW) is the least popular one with only 32 bullish hedge fund positions. Corteva, Inc. (NYSE:CTVA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CTVA is 32.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and surpassed the market again by 4.8 percentage points. Unfortunately CTVA wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); CTVA investors were disappointed as the stock returned -5% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.
Follow Corteva Inc. (NYSE:CTVA)
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Disclosure: None. This article was originally published at Insider Monkey.
